Melrose to buy U.S. ventilation products maker Nortek

Wed Jul 6, 2016 2:29pm EDT
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By Esha Vaish

(Reuters) - Britain's Melrose Industries (MRON.L: Quote) has agreed to buy U.S. ventilation and home security products maker Nortek NTK.O for $2.81 billion, including debt, in a bet on the U.S. construction market.

Shares in Melrose, an engineering turnaround specialist that buys firms with the aim of selling them at a profit, rose as much as 42 percent to a record 580.5 pence, as the news ended investors' almost year-long wait for it to announce a deal.

Some analysts said the deal could be part of an emerging trend for European companies to make acquisitions in the United States, as Britain's decision to quit the European Union unsettles markets closer to home and Asian economies falter.

"The more uncertainty and weakness there is in Europe, the more attractive the U.S. is going to look. Brexit is one more reason that the U.S. looks relatively good to European firms," said Jeffrey Nassof, director at Freeman Consulting Services, an investment-banking consultant.

Melrose has been scouting for an acquisition since it sold its utility consumption metering business last year, leaving it with only one business, Brush - a maker of electricity generating equipment that gets over half of its revenue from Europe.

Negotiations with Nortek kicked off in March and the deal was set to be announced by the end of June, soon after the UK referendum on EU membership, said a source close to Melrose.

"Melrose had to take stock of the referendum's outcome and wait for markets to settle down," the source said. "Nortek generates the bulk of its revenues in dollars and remains an attractive opportunity for Melrose."

Nortek made 90 percent of its 2015 revenue in North America. According to Melrose, the deal comes against a backdrop of "key U.S. economic indicators pointing to continued momentum in construction".   Continued...